Preelection report Presidential and legislative elections in Costa

Pre-election report Presidential and legislative elections in Costa Rica February 4 th, 2018

GENERAL CONSIDERATIONS What is elected? Will there be a second round? • President of the Republic, First Vice President and Second Vice President. Yes, in the event that none of the candidates exceeds 40% of the total votes validly cast. • Members of Congress (57) The second round will be on Sunday April 1 st, between the two candidates who received the most votes. Electoral Calendar Political Constitution of Costa Rica. Art. 107, 116 Provisional, 133 and 134. Every four years, the President, Vice Presidents and Deputies are elected on the first Sunday of February. This year, the election will take place Sunday February 4 th. How is it elected? Suffrage is compulsory, universal, direct and secret. How many are the presidential candidates? A total of 13 candidates participate in the elections. Primaries were held in the groups Citizen Action (Acción Ciudadana) -Carlos Alvarado Quesada-, National Liberation (Liberación Nacional) -Antonio Álvarez Desanti-, Libertarian Movement (Movimiento Libertario) -Otto Guevara Guthand Christian Social Unity (Unidad Social Cristiana) Rodolfo Piza Rocafort-.

INTRODUCCIÓN CANDIDA TES Mario Redondo Poveda Christian-Democratic Alliance (Alianza Demócrata Cristiana) Oscar Andrés López Arias Accessibility without Exclusion (Accesibilidad Sin Exclusión ) Sergio Mena Díaz Antonio Álvarez Desanti National Liberation New Generation (Nueva Generación) (Liberación Nacional ) Jhonn Vega Masis Worker’s Party (Partido de los Trabajadores) Edgardo Vinicio Araya Broad Front (Frente Amplio) Gerardo Alvarado Muñoz National Restoration (Restauración Nacional ) Rodolfo Piza de Rocafort Social Christian Unity (Unidad Social Cristiana) Juan Diego Castro Fernández National Integration (Integración Nacional) Rodolfo Humberto Hernández Social Christian Republican (Republicano Social Cristiano) Otto Guevara Guth Libertarian Movemente (Movimiento Libertario) Carlos Andrés Alvarado Citizen Action (Acción Ciudadana) Stephanie Campos Costa Rican Renewal (Renovación Costarricense)

INTRODUCCIÓN CANDIDA TES ¿Who leads the polls? 25, 8% 12, 4% 12, 8% 14, 6% Fabricio Alvarado Juan Castro Antonio Álvarez Undecided Evolution of voting intention 40 35 37 34 Fabricio. Alvarado Fabricio 30 27 25 15 Antonio Álvarez Antonio Alvarez 18 20 17 Undecided Indecisos 16 15 14 10 Juan Castro Juan 11 5 0 2 November Noviembre 3 December Diciembre January Enero *Source: Own elaboration based on polls published in the last three months by Opol Consulting, CID Gallup, Centro de Investigación y Estudios Políticos (CIEP) de la Universidad de Costa Rica (UCR).

CANDIDA TES INTRODUCCIÓN CONTINUATION Political spectrum of the three main candidates Voting intention 18% 16% Free Market Economic Interventionism 14% 12% 10% Antonio Álvarez Juan Castro 8% 6% 2% 0% Fabricio Alvarado

CANDIDA TES INTRODUCCIÓN CONTINUATION The three candidates that lead polls Businessman. Born in Antonio Álvarez National Liberation (Liberación Nacional) San Jose in 1958. He studied Law at the University of Costa Rica and holds a master’s degree in International Taxation Law from Harvard University. His commitment to politics goes way back, since he began attending meetings of the National Liberation Party (Partido de Liberación Nacional) as a young man. Since then, he has held numerous positions in public administration. First, as president of Fertica in 1985. Then, he was Minister of Internal Affairs and Police. He was elected Congress deputy twice: 1994 -1998 and 2014 -2017. In both cases, he served as President of Congress. He also ran for president twice, in 2001 and in 2006.

CANDIDA TES INTRODUCCIÓN The three candidates that lead polls Journalist and Christian music singer. Born in San Jose in 1974. He studied Journalism at the University of Costa Rica. Fabricio Alvarado Muñoz Nationa Restoration (Restauración Nacional) Alvarado started his professional career as a reporter and then as a news presenter. Also, he performed as Lawyer. Born in Cartago Juan Diego Castro Integración Nacional in 1955. He holds a bachelor’s degree in Law and a master’s degree in Criminal Sciences from the University of Costa Rica, and a Ph. D in Educational Mediation from the La Salle University. From May 1994 to July 1996, Castro was Minister of Security. He was removed from office after CONTINUATION Christian music singer and released a few albums. As a public officer, his experience is limited to his work as a deputy of the Legislative Assembly, since 2014. the Assembly passed a motion of no confidence; the first of its kind to be issued against a minister in the history of the country. In 1996 he became Minister of Justice and Peace, during the administration of José María Figueres. He left office one year later.

GOVERNMENT PLATFORMS Taxes Fabricio Alvarado Muñoz • Consolidate the reduction of tax evasion through digital invoicing and similar electronic mechanisms. • Establish a progressive tax structure that allows a better redistribution of national wealth. • Apply an emergency fiscal policy to freeze nonessential expenses during the first two years and suspend those that are superfluous during the entire four-year period. Finances • Reorient the financial market development towards the placement of credits in productive investment. • Support reforms that are aimed at curbing the usurer management that is currently made of credit cards, especially in terms of interest rates and financial education for the consumer.

GOVERNMENT PLATFORMS Taxes Juan Diego Castro Fernández • Modernize taxes and correct distortions. • Convert sales tax into a value-added tax that allows deduction of all inputs, while extending the base to all goods and services. The general rate will be 13%. Finances • Align financial regulation to international best practices and simplify its organizational structure. Taxes Antonio Álvarez Desanti • Control and contain the main areas of public expenditure, particularly spending on pensions, current transfers and wages. • Reorganize the tax structure and make the collection more efficient and effective, through the strict control of tax evasion and avoidance. Finances • Universalize electronic money, for the payment of purchases and services without the need to use credit cards or cash. • Promote the teaching of financial services management from primary education to tertiary education.

INTRODUCCIÓN ELECTORAL KEYS ANTECEDENTE S Characteristics of the election: In the national electoral system, two criteria of representation coexist: relative and proportional majority. The first one applies to the Executive Branch, which grants the presidency to whoever exceeds 40% of the total votes or, if no candidate reaches this threshold, forces a ballotage between the two candidates with highest amount of votes. In the case of the Legislative Branch, representation is proportional. The seats of each province are distributed among the most voted parties, occupying all seats available according to a unicameral format. Traditional parties and ruling party: After the Citizen Action Party won the elections in 2014, the government of Luis Guillermo Solís put an end to the two-party system formed by National Liberation and Christian Social Unity. However, the results were not good at all and the polls prove it: the candidate backed by the government is in fifth place, with only 6% of voting intention. Same-sex marriage: The Inter. American Court of Human Rights (IACHR) issued an advisory opinion on the matter, which was requested by the Costa Rican government and was criticised by most of the presidential candidates. Only five out of thirteen candidates would be in favor of same-sex couples marriage, which helped Fabricio Alvarado (National Restoration) to lead polls. He has promised to withdraw from the IACHR if necessary.

INTRODUCCIÓN ELECTORAL KEYS ANTECEDENTE S These opinions and attitudes show the conservatism of national politics and the ideology of voters. However, President Solís might agree with the court to elevate legislation on same-sex marriage above domestic constitutional law. This would imply reforming the Family Code and leaving the future president with no choice but to abandon the IACHR. Corruption: In the last few months, the case publicly known as "cementazo" has set the government’s agenda. Several public officers are involved in the benefits granted by the Bank of Costa Rica (Banco de Costa Rica - BCR) to businessman Juan Carlos Bolaños for the import of Chinese cement. The three branches of government are suspected to be involved. The Executive branch handed a report to the Legislative Assembly, which is investigating this situation. In this report, the Executives denies most of the information on the ‘’cementazo’’ case. This problem also explains why candidate Carlos Alvarado of the ruling Citizen Action Party is far from making it to a second round of elections. It is not impossible though, since the political scenario is volatile.

PROJECTIONS INTRODUCCIÓN High election uncertainty The scenario of high volatility presented by the upcoming Costa Rican elections ensures the second round of elections, although no consultant or research studies can estimate which two candidates will participate in the ballotage scheduled for Sunday April 1 st. To win the presidency February 4 th, any candidate should reach 40% of the votes (according to the system of absolute majority stated in the Constitution). This is unlikely to happen since no candidate even reach 20 points, according to polls. At the same time, no one can be assured a place among the first positions, due to continuous changes in public opinion. For example, Fabricio Alvarado (National Restoration) has risen from 3% in December to 17% today. Although voting is mandatory, controls over democratic exercise are excessively lax and there is no such thing as a guarantee to ensure those who until now remain undecided will vote.

PROJECTIONS INTRODUCCIÓN This group of people might support one of the 13 parties in dispute, but could also adhere to those who have decided not to participate in the electoral process. For instance, in the last election, about 68% of the voting eligible population participated in the first round. In second round, only about 56% voted. Popular discontent with bipartisanship and the unsuccessful alternative proposed to the government of Luis Guillermo Solís is the prevailing climate in Costa Rica nowadays. This country is going through an important economic and fiscal crisis that every candidate must bear in mind, even though no one has suggested a clear solution.

PROJECTIONS INTRODUCCIÓN LEGISLATIVE ELECTION Seats to be disputed per province Alajuela: 11 Heredia: 6 Cartago: 7 Limón: 5 Guanacaste: 4 San José: 19 Puntarenas: 5 Total: 57 seats

PROJECTIONS INTRODUCCIÓN Current composition of the Assembly 34 22 1 Opposition Alliance* (Alianza Opositora) 34 57 1 6 Broad Front – Citizen Action (FRENTE AMPLIO – ACCIÓN CIUDADANA) 22 Others 1 *Opposition Alliance is constituted by National Liberation (18), Social Christian Unity (8), Libertarian Movement (3), Costa Rican Renovation (2), Accessibility without Exclusion (1), National Restoration (1) and Christian Democrat Alliance (1). Flags represent the two largest parties. Party fragmentation Complete renovation of seats The government of President Luis Guillermo Solís is not in a easy position within the National Assembly, as it does not have parliamentary majority to pass laws. Therefore, consensus becomes indispensable. It should be noted that the Opposition Alliance (Alianza Opositora) is solely legislative in nature, given that each party also has its own candidate running for president. The mandate of the deputies lasts for four years and they are all elected simultaneously. So, it is inevitable to observe the impact of the presidential elections on the distribution of seats. Usually, presidential candidates who win the election in first round obtain parliamentary majority. If there is a ballotage as it will probably be the case, the Assembly is more divided.

PROJECTIONS INTRODUCCIÓN What would the Assembly consist of? 14 31 8 57 Opposition Alliance* 31 Broad Front – Citizen Action 8 4 PNG / PIN / PRSC Others 14 4 *Opposition Alliance comprises National Liberation (15), Christian Social Unity (10), Libertarian Movement (1), Costa Rican Renewal (1) and National Restoration (4). Flags represent the two largest parties. Party system fractionalization Unexamined legislative scenario Bipartisanship has taken Costa Rica to a place in which it is no longer positive for the development of politics. For years the National Liberation and Christian Social Unity were the only winners in elections. Today, the political scenario reveals the population’s fatigue with the system and its lack of interest in politics. For example, more than 50% of the population have not decided who to vote, less than a week before the election. Still, it should be considered that several parties - both new and old -, might enter the Assembly after many years or after having split from one of the traditional parties. Surveys are another relevant factor in the Costa Rican case. The unpredictability of the presidential election has caught the attention of consultants and analysts completely ignoring the appointment of the new 57 deputies, who will be part of the National Assembly for the term 2018 -2022. Different studies evidence little interest in the parties involved, a multiplicity of up to ten groups that could be represented in the Assembly. As a consequence, an estimated projection was made, based on a set of analysis, with the aim of getting as close as possible to the results of next Sunday February 4 th.

CONCLUSION Considering the above, we can firmly conclude that the next president of Costa Rica will be elected on Sunday April 1 st, since it is almost impossible for any candidate to reach 40% of the votes in first round. However, confirming who will compete in a ballotage scenario would be irresponsible, given how close to each other candidates are in terms of voting intention and the role of important campaign issues such as same-sex marriage or corruption. Another relevant topic to take bear in mind is the impact of the presidential election on the distribution of seats in the National Assembly. The last elections held (even before the rupture of bipartisanship) show that parties that win in first round tend to have bigger parliamentary majorities. The situation changes when a second round is necessary, which means that the Assembly will be more divided. Although National Liberation and Christian Social Unity are no longer the only two actors in national politics with possibilities of governing, they still play an important role in the proselytizing dispute. Several new organizations have emerged as detachments from these traditional parties. At the same time, the current administration has increased popular discontent with government’s inability to solve the fiscal crisis.

CONCLUSION Under these conditions, the challenge of the next administration will be to advance a tax-fiscal reform to provide the necessary resources to the government. Essential funds to resume the productive path, healthy finances and without excessive levels of debt. The proposed reforms respond to the requests that the Organization for Economic Cooperation and Development (OECD) has been making to the nation, although the government platforms of each candidate do not seem to be more clear than the intentions of the current administration to make the change happen. If Costa Ricans have to vote in early April, legislative difficulties will probably keep existing. An even distribution of the seats could favor sectors not aligned with the government. It does empower opposition representatives, since they check and balance the decisions or intentions of the Executive Branch. Unfortunately, the focus until now has only been placed on who will replace Luis Guillermo Solís in May forgetting how indispensable the Congress will be when it comes to solving the current crisis in Costa Rica.

Avenida Entre Ríos 258 3 E, Buenos Aires (1079), Argentina. Tel. + (5411) 5218 -4647 1101 Brickell Avenue, South Tower, 8 th Floor, Miami, Florida (33131). Tel. +1 (786) 828 -0675